Broadcom

Broadcom is two businesses under one roof, both selling to the largest buyers in their markets.

Semiconductor solutions designs chips that move and process data. The fastest-growing part is AI: custom accelerators (XPUs) designed with hyperscalers and AI labs, and the Ethernet switch chips, Tomahawk and Jericho, that connect those accelerators into clusters of tens of thousands. The rest is a long list of products where Broadcom has led for years: FBAR radio filters and Wi-Fi chips for smartphones, PCIe switches and storage controllers for servers, chips for hard drives and SSDs, broadband and set-top box chips, and industrial parts. Broadcom designs the chips and buys wafers mostly from TSMC, keeping fabs only for FBAR filters and optical lasers.

Infrastructure software is the result of three acquisitions: CA Technologies (2018), Symantec's enterprise business (2019) and VMware (November 2023, the largest). VMware Cloud Foundation lets a company run its own data center as a private cloud; the mainframe tools run and secure IBM mainframes; Symantec and Carbon Black protect endpoints and networks.

The two halves share a pattern. Broadcom buys or builds products that large customers depend on and find hard to replace, focuses on the biggest accounts, and runs them with tight cost control. Its customers are concentrated: by the 10-K's count, the top five end customers were about 40% of revenue in fiscal 2025.

What ties the AI chips together is interface technology. The high-speed serial links, memory interfaces and packaging that make a custom accelerator work are the same ones that make its switches fast, so Broadcom can design the chip and the network that connects it as one system.

On the chip side, leaving means redesigning a product. A custom accelerator takes years of joint design with Broadcom's engineers, and the next generation builds on the last one's interfaces, packaging and test flows; moving to Marvell or another partner, or bringing the work in-house, restarts much of that. Switch makers and cloud companies build their network software and operations around Tomahawk and Jericho, so changing chip suppliers means re-qualifying switches and retraining tools. Phone makers design Broadcom's filters into a phone two years before launch. What they would move to: Marvell or MediaTek for custom chips, NVIDIA for complete AI systems and networking, Cisco or Marvell for switch silicon, Qualcomm or Qorvo for radio parts.

On the software side, leaving VMware means migrating every virtual machine, rewriting automation, replacing backup and monitoring integrations and retraining staff, which large companies measure in years. Mainframe tools are wired into decades of production jobs. The alternatives are real (Nutanix, Hyper-V, OpenShift, public cloud; IBM and BMC on the mainframe), and Broadcom's VMware pricing pushed many customers to start moving. The largest customers, where a migration is hardest, are the ones Broadcom concentrates on.

The fabless model shows in how little Broadcom spends on factories. Capital spending was $623M in fiscal 2025, about 1.0% of revenue of $63.9B. Revenue grew 23.9% that year, after 44.0% in fiscal 2024 when VMware arrived; it was $35.8B in fiscal 2023, before the deal. Over the five years from fiscal 2020 it grew about 21.7% a year.

Gross margin was 67.8% in fiscal 2025, up from 56.6% in fiscal 2020, as software became a larger part of the mix and AI chips grew. Operating margin was 39.9%, back from 26.1% in fiscal 2024, the year VMware's restructuring and integration costs landed, and close to its 45.2% of fiscal 2023.

The business turns most of that into cash. Operating cash flow was $27.5B and free cash flow $26.9B, 42.1% of revenue. Equity pay was large at $7.6B, 11.8% of revenue, much of it from VMware's engineers; after it, free cash flow was $19.4B, 30.3% of revenue. Buying VMware was funded largely with borrowing: debt stood at $65.1B at the end of fiscal 2025 against $16.2B of cash.

AI is where the chip business is heading. Each large AI company that decides to design its own accelerator becomes a multi-year customer for Broadcom's design work, its chips and the networks around them; OpenAI's October 2025 announcement of accelerators built with Broadcom is the newest example. The next steps are larger clusters across buildings and campuses, which need faster switches like Tomahawk 6, routing chips like Jericho to join sites, and co-packaged optics that put the optical links beside the switch chip to cut power. Broadcom is also starting to sell whole racks built on its XPUs, a step from selling parts toward selling systems.

In software, the VMware conversion to subscriptions is largely done, so growth depends on selling the full VCF bundle and its add-ons to the base, and on private AI: running AI models on a company's own hardware under VCF. Acquisitions built the whole software segment, and the 10-K still names them as part of how Broadcom grows.

The rest of the chip portfolio, wireless, storage, broadband and industrial, is mature and moves with each market's cycle.

• A few customers carry the AI business. Each custom accelerator program is worth billions, and any of those customers can switch partners, take more of the design in-house or buy more from NVIDIA. The top five end customers already make up about 40% of revenue.
• NVIDIA's integrated systems. NVIDIA sells GPUs, networking and software as one package, and every improvement in it raises the bar a custom chip and an Ethernet network have to clear.
• Software customers leaving. The VMware price changes pushed customers to test Nutanix, Hyper-V, OpenShift and public cloud. Customers lost this way do not come back, and new applications are being built for Kubernetes and public cloud rather than virtual machines.
• Apple building its own radio chips. Apple's own modem and wireless chip reduce what it buys from outside suppliers, Broadcom included.
• Debt from VMware and the need to keep finding acquisitions large enough to matter.
• Manufacturing in Asia. Most wafers come from TSMC in Taiwan and most inventory sits in Malaysia, which exposes supply to geopolitics and trade rules.